The London Paper: Close enough to break-even

On Friday, Media Week, the magazine for ad sales types, followed up the Guardian‘s story about The London Paper (sorry about the spelling, I’m bloody-minded that way) losing £16.8m on turnover of £8m during its first 10 months in existence.

This being Media Week, the comments — from a couple of ad sales types apparently familiar with this market — were reasonably interesting, if inconclusive.

Mark Doherty, for example, noted that TLP’s £8m of revenues equated to an average of £33,000 per edition (actually, my sums indicate £38,000, but the difference doesn’t matter too much).

Another commenter suggests that Metro “had its first £500,000 week after only nine months and took well over £20m ad. revenue in it’s first full financial year” — a comparison that makes TLP look seriously pedestrian.

In response, another reader disagrees, arguing that Metro only generated around £4m in ad revenue during its first year. Presumably, this comparison is meant to make us believe that TLP’s sales team is touched by genius.

Such wild disagreements aren’t unusual among sales folk, whose perception of historic sales figures usually resemble a fisherman’s memory of prize carp, or an adolescent male’s perception of penis size.

That said, for a 500,000 circulation newspaper like TLP, £38,000 per issue does sound . . . a bit small. It’s the kind of number that might make the publisher of a mid-sized trade weekly happy.

So how much revenue does TLP really need to break even?

The question is unanswerable. During its first ten months, TLP’s costs amounted to £25m. But that figure presumably includes all sorts of one-off start up items.

For the sake of argument, let’s assume that, once established, TLP could break even on 50% of that 10-month expenditure. On that basis, it would need to generate revenues of around £12.5m during the 10 months from July 2007.

That doesn’t sound impossible. But everything depends on how fast TLP’s ad revenues are growing in a depressed market. Predictably, News International says that they are growing rapidly.

As Roy Greenslade suggests, it seems unlikely that TLP will meet its publicly-announced target of breaking even during Year Two.

Year Three, however, will probably be different. And a venture like TLP will get at least three years in which to establish itself. (Metro took four years; and London Lite apparently has a “five-year plan to achieve profitability”.)

The critical question is whether TLP is building an authentic audience that advertisers want to reach.

I’m no fan of free newspapers, but I think the answer to that question is affirmative.

Of course, there are problems with the TLP’s toppy circulation (500,000 vs. Lite’s 400,000). Most agencies know already that they don’t need the “shoppers, trippers and tourists” identified by Greenslade as inflating the paper’s circulation. If the agencies are sensible, they’re not paying for them, either.

The numbers are just launch-time machismo. The broader point is that TLP is carving out a niche. The aggression with which the paper markets itself to advertisers suggests that it is going to be successful.

(Take a look, for example, at the “conference” — called Generation Free — staged by TLP last week. Or head over to the Guardian to take a look at Media City, a supplement fetched up “in partnership” with TLP. The content is crapulous; some of it is risible. But it beats out a consistent message connecting London, youth and conspicuous consumption. This is a message that thirtysomething media planners on £30,000 a year will have no difficulty decoding.)

Somewhat forlornly, Greenslade wants Murdoch and Rothermere to shut down their freebies (perhaps just the afternoon ones?) and focus on their paid-for titles.

If any of this was about quality journalism and editorial standards, this is what would happen.

But it’s not. London’s freesheet circulation wars are about Big Media cannibalizing its own revenue stream before someone else does it.

Nasty stuff. Unstoppable, too.

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